If you are new to the freight industry, you might being wondering, what is a freight broker and how do they make money? In this article, I will answer both of those questions and a whole lot more, read on.
- What is a Freight Broker?
- Key Players in the Freight | Logistics | Trucking Industries
- How Do Freight Brokers Make Money? Step by Step Breakdown
- Is Becoming a Freight Broker Worth It?
- Can You Make A Lot Of Money As A Freight Broker?
- Is There A Demand For Freight Brokers?
- What Is It Like To Be A Freight Broker?
- Conclusion
What is a Freight Broker?
A freight broker (also known as a logistics broker, transportation broker, truck broker, shipping broker, and load broker) is a middle man between shippers, needing transportation services and asset based motor carrier [trucking companies] that actually perform the services.
Brokers use their industry knowledge, online freight broker software tools and their network of motor carriers to ensure the shippers freight picks up and delivers on time with no damage.
In the United States, freight brokers are licensed by the Federal Motor Carrier Safety Administration (FMCSA). Freight brokers oversee the logistics and transportation process, from cradle to grave. This includes: sourcing motor carriers, scheduling pick-up and delivery appointments while managing and tracking shipments through to delivery.
Freight brokers also deal with any surprises or issues that may arise, including route adjustments or delays, in order to keep their customers supply chain functioning smoothly.
Key Players in the Freight | Logistics | Trucking Industries
- Freight Broker: The middleman that arranges transportation between a shipper and a motor carrier.
- Freight Agent: A person that coordinates freight shipments that typically works under the umbrella and supervision of a licensed/bonded freight broker. Freight agents are typically 1099 independent contractors.
- Freight Forwarder: Freight forwarders typically differ from freight brokers in the fact that can and do take possession of the cargo, including the consolidation of smaller shipments where they then arrange for the larger shipments to get to their final destinations.
- Motor Carrier: Also known as trucking companies or owner operators. These are the companies that actually provide the trucking/transportation equipment and services. They own or lease the actual trucks and trailers that provide the services to shippers and that is why they are referred to as asset based.
- Shipper: Is any party that needs products transported from point A to point B.
- Customs/Import/Export Broker: A person or entity that facilitates the clearing of goods in and out of a country for importers or exporters.
Why Do Companies Use Freight Brokers?
One of the first questions I was asked back in 2003 after telling my friends and family that I was starting a freight brokerage was, “why do shippers use brokers rather than just going direct to trucking companies?”
And the answer all comes down to TIME.
Businesses like working with freight brokers because they benefit from having a single point of contact during the entire shipping process. Using a broker eliminates the hassle of managing hundreds or even thousands of motor carrier and truck drivers.
Bottom line, freight brokers save shippers time, headaches, and most of all money.
Here are some reasons why companies use freight brokers:
- Expertise and Industry Knowledge
- Large Network of Vetted Motor Carriers
- Time and Resource Efficiency
- Cost Savings Based Upon Volume and Optimization
- Flexibility and Scalability
- Access to Specialized Services
- Global Logistics Support
- Risk Mitigation
- Efficient Document Handling
CLICK HERE to Discover How to Become A Freight Broker in 7 Simple Steps [Updated 2024]
Basics of a Freight Broker’s Job
- Connecting Freight Shippers with Motor Carriers [Trucking Companies]
- Negotiating Rates and Contracts
- Managing Freight Pickups Through to Delivery
- Ensuring Compliance and Documentation
How Do Freight Brokers Make Money? Step by Step Breakdown
Free Download – How Freight Brokers Make Money [Step by Step]
Freight brokers get paid for helping their customers services, this is known as a brokerage fee. Brokers make most of their money from this fee, which is usually a percentage of the total cost of delivery. The average brokerage fee is ~15% of the shipping costs.
Customer Revenue (Shipping Fee) – Carrier Costs (to Trucking Company) = Gross Profit (Brokerage Fee)
Is Becoming a Freight Broker Worth It?
The U.S. freight brokerage market is projected to increase over the next several years, growing from USD 17.96 billion in 2024 to USD 26.82 billion by 2029. These numbers highlight the stability and growth of the domestic freight brokering market.
Cons of Becoming A Freight Broker
- Licensing & Bonding Requirements
- Competitive Nature of the Business
- Startup Investment Required
For many freight brokers, owning their own business and the ability to work remotely from the comfort of their own home makes the career choice very attractive. Brokers can attain a work-life balance that support’s their and their families’ needs while they are able to earn a significant income.
Pros of Becoming A Freight Broker
- High Earning Potential
- No Licensing Exam
- Low Barrier to Entry
- No College Degree Required
- Flexibility in Employment (W2, License Broker or 1099 Contractor)
- Growing Industry
- Able to Work From Home
- Play a Vital Role in Commerce
Becoming a freight broker has many benefits. You can earn a nice living, it’s not too difficult to get started, and you can choose how and where you work. The industry is always evolving, is fast paced so getting bored is unlikely.
The work will be interesting and challenging, but you can do it from anywhere if you have the right tools. To be successful, you have to put in a lot of hard work and dedication, but the benefits are definitely worth it.
CLICK HERE to Find Out How Much it Cost to Become a Freight Broker in 2024
Can You Make A Lot Of Money As A Freight Broker?
Yes, you can make a lot of money as a freight broker. Typically, freight brokers earn a profit margin of 10 – 20% based on the entire cost of shipments.
Brokers who handle high-value shipments or negotiate favorable rates can earn a lot of money. Freight broker agents who work under a licensed broker earn commissions of 50 – 70%. The freight brokerage keeps the remaining percentage brought in by freight agents to cover the operational costs and to generate a profit.
As you can see in the chart below, the largest brokerages in the nation are earning billions in revenue.
Top Freight Brokerage Firms
| Rank 2023 | Company | Gross Revenue (Millions) | Net Revenue (Millions) | Types of Freight |
| 1 | C.H. Robinson Worldwide | $15,828.0 | 2,197.0 | air/expedited, rail intermodal, LTL, dry van truckload, refrigerated, flatbed/heavy haul, bulk/tank |
| 2 | Total Quality Logistics | $8,745.0 | 2,007.0 | rail intermodal, LTL, dry van truckload, refrigerated, flatbed/heavy haul, bulk/tank, air/expedited |
| 3 | Coyote Logistics | $5,200.0 est | 670.0est | rail intermodal, LTL, dry van truckload, refrigerated, flatbed/heavy haul |
| 4 | Worldwide Express/GlobalTranz | $4,900.0 | 990.0 | air/expedited, LTL, dry van truckload, refrigerated, flatbed/heavy haul, parcel |
| 5 | Landstar System | $3,995.0 est | 545.0est | air/expedited, rail intermodal, LTL, dry van truckload, refrigerated, flatbed/heavy haul |
Chart adapted from: https://www.ttnews.com/logistics/freightbrokerage/2023
Now, these are the top brokerages and you shouldn’t expect to make those numbers unless you become one of the top brokerages in the nation. The average brokerage is probably generating ~$5 million in revenue with a gross profit margin of 12% – 20% leaving between $600,000 and $1,000,000 in gross profit.
Freight brokerage profit margins vary, ranging from 10% – 30%, depending on freight niche, market conditions, competition, and the broker’s negotiating skills. Brokers may also consider diversifying their revenue sources by providing value-added services or by specializing in a particular market.
Specializing in a freight niche, streamlining operations to increase efficiency, and developing your reputation in the marketplace are best practices for maximizing your revenues. Revenue growth is achieved by scaling both sales and operations, recruiting more workers, and expanding the freight services offered.
Tips On How To Make A Lot Of Money As A Freight Broker
- Invest in Sales Skills
- Experience and Expertise
- Find a Coach or Mentor
- Niche Specialization
- Efficient Operations
- Effective Negotiation
- Adaptability to Market Trends
- Expanding Client Base
- Exceptional Customer Service
- Leveraging Online Marketing to Scale
Is There A Demand For Freight Brokers?
Yes, there is a consistent and ongoing demand for freight brokers in the logistics and transportation industry. In the United States, the shipping industry is expected to grow. The freight brokerage market is expected to have a compound annual growth rate of 8.35% between 2024 and 2029.
Source: https://www.mordorintelligence.com/industry-reports/united-states-freight-brokerage-market
The rising complexity of supply chains, as well as trade globalization, is leading to an increase in demand for freight brokerage services. Because of this need, skilled brokers are always in high demand to help manage the movement of freight.
What Is It Like To Be A Freight Broker?
The logistics and transportation business is fast-paced, and working as a freight broker can be both challenging and rewarding. The broker’s primary responsibility is to help shippers save time and money by managing their freight from pickup to delivery without delays or damages. This takes a comprehensive understanding of the freight market, transportation capacity, and the factors that affect rates and pricing.
Freight Broker Roles and Responsibilities
- Market Research
- Facilitating Shipments
- Negotiating Freight Rates
- Building Relationships
- Managing Documentation
- Problem-Solving
A good freight broker builds strong relationships with both shippers and carriers. Building trust between both shippers and carriers is important for repeat business and an excellent reputation in the industry.
Additionally, a freight broker take care of the paperwork related to shipments, like contracts and bills of lading, and require paying close attention to the details to make sure all the i’s are dotted and T’s are crossed.
Staying current on market, regulatory, and business trends is important for success since it allows brokers to take advantage of new possibilities and respond quickly to market developments.
Since shipments can be delayed or face unexpected challenges, freight brokers must be adaptable and good at problem-solving in order to ensure timely and secure product delivery.
Key Skills and Qualities of a Successful Freight Broker
- Communication Skills
- Sales Skills
- Negotiation Skills
- Time Management
- Excellent Customer Service
- Multitasking
- Adaptability
- Grit
Conclusion
Freight brokerage is a fast paced and dynamic career with significant opportunities based upon growing demand not just in the United States but globally.
Becoming a freight broker does not require a college degree or a State of Federal exam to study for or pass in order to get licensed. This is important in todays world because it remains open to young people choose not to pursue a college degree.
Good freight brokers are able to earn a significant income based upon the number of clients and loads they manage and service. It’s not unusual for an independent licenses freight broker to generate $1 million to $5 million or more in gross sales.
When I started my freight brokerage back in 2003, I saw an amazing opportunity to support a critical element of our economy while earning a significant income.
And today I feel even more optimistic about the future of freight brokers. If you have the proper skills and work ethic starting a freight broker business can be very rewarding and lucrative..
If you enjoyed this post or have questions, reply below with your comments. I always enjoy your feedback!
To your success,
Dennis Brown
